Hidden scourge of under-employment in Scotland

SOARING numbers of Scots have been forced into “under-employment” as the banking crash-induced “Great Recession” changes patterns of work across the country, an economic expert has warned MSPs.

A seismic shift away from full-time to part-time work and the disappearance of overtime have created a culture in which Scots’ lack of work is forcing them to cut back on household spending, says Professor David Bell.

Last night, campaigners warned that Prof Bell’s report to the economy committee revealed the extend of “disguised unemployment” and the new phenomenon of “in-work poverty” emerging north of the Border.

Scotland is likely to be affected more than many areas south of the border, the report warns, and there are concerns many could also be driven to high-interest lenders and payday loans to make ends meet.

About half a million Scots are now feared to be either out of work or under-employed. The number of part-time workers, including those who are self-employed, has risen by 74,000 since 2008, alongside a dramatic fall in the hours worked by full-time staff, according to Prof Bell’s submission.

The under-employment rate stands at over 10 per cent among Scots, with the academic finding there is not enough demand for the labour they are willing to supply. “The ‘Great Recession’ has had an adverse impact on the Scottish labour market,” the report concludes.

The jobless rise has been less then expected, but there has been a sharp fall in the number of hours that Scots are now working overall.

The report says: “Amongst the full-time employed, there has been a reduction in their number and in their average weekly hours, partly as a result of reduced overtime working.

“In contrast, there has been an increase in part-time working, though little change in their average weekly hours.

“There has also been a trend towards self-employment, particularly part-time self-employment, where weekly hours are extremely low.”

The soaring number of Scots unable to get enough work to meet their needs will “constrain household spending”, according to Prof Bell, and thwart efforts to breathe life into the economy.

Scots struggling in this situation will not show up in official unemployment statistics, because they remain in work.

But the report says: “They and their households may be experiencing considerable hardship. Costs to the government are also rising, because falling hours implies lower incomes, which in turn leads to an increase in the payment of tax credits.”

Margaret Lynch, chief executive of Citizens Advice Scotland, said: “We know that thousands of Scots can’t get work at all, but far too many of those who are in work are struggling in low-paid, temporary and unsatisfying jobs which don’t meet either their aspirations or their bills.

“These people don’t show up in the unemployment figures, but it’s clear that they are just as badly hit as many of those who are out of work.”

She added: “Many people who are under-employed have to top up their income by borrowing, and often turn to high-interest lenders like payday loans, which they can’t repay and which gets them into a spiral of crisis debt.”

Dr James McCormick, Scotland adviser to poverty charity the Joseph Rowntree Foundation, said under-25s had suffered “mass unemployment”, but generally there had been a shift to underemployment.

“What we see now is a significant risk of what we would term ‘in-work poverty’,” he said. “This is people who are working, they may be doing less then 20 hours a week, but even if they are on a decent hourly rate of pay, they may still find themselves below the poverty threshold, because they’re not working sufficient hours.”

Low pay remains a “persistent problem”, Dr McCormick said, and the combination of factors leads to a situation of “disguised unemployment”.

Workers caught in the under-employment trap are likely to be male, young, less well qualified and work in the private sector, the report finds.

There are 204,000 people out of work in Scotland, but this is almost doubled since the onset of the downturn in 2008.

Scotland’s economy continues to stagnate and shrank by 0.4 per cent during the second quarter of 2012, according to the latest figures.

Almost 40 per cent of businesses reported a decrease in turnover, the Lloyds TSB Scotland Business Monitor found. In the three months ending November, 29 per cent of firms increased turnover, 32 per cent stayed the same and 39 per cent experienced a decrease.

Last year, the STUC estimated that more than half a million Scots were either out of work or under-employed.

General secretary Grahame Smith said there were too many Scots unable to secure the full-time work necessary to provide a “decent standard of living for themselves and their families”.

The economy committee inquiry will get under way this week, when Prof Bell submits his evidence. It will look into what actions can be taken by business, the public and third sector and the Scottish Government to address under-employment without having the “unintended consequences” of increasing jobless levels.